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using-offtoa:assumptions:financial-assumptions:supplier-payments [2016/05/28 16:04] mdavis |
using-offtoa:assumptions:financial-assumptions:supplier-payments [2016/09/19 13:01] (current) |
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| Many small companies fail to plan their cash flow. Imagine two companies, Company A and Company B, which are in identical businesses with identical revenues of $10M per year and annual profits of $1.5M. The only difference is that Company A must pay its suppliers immediately and its customers pay their bills within 30 days of purchasing products and receiving invoices from the company. Meanwhile, Company B must pay its suppliers within 30 days of receiving supplies and its customers pay their bills online immediately upon ordering. Due to these cash flow differences, Company A could require more than $1M more funding than Company B. | Many small companies fail to plan their cash flow. Imagine two companies, Company A and Company B, which are in identical businesses with identical revenues of $10M per year and annual profits of $1.5M. The only difference is that Company A must pay its suppliers immediately and its customers pay their bills within 30 days of purchasing products and receiving invoices from the company. Meanwhile, Company B must pay its suppliers within 30 days of receiving supplies and its customers pay their bills online immediately upon ordering. Due to these cash flow differences, Company A could require more than $1M more funding than Company B. | ||
| - | Fundamental to the success of many startup companies is their cash strategies. You need to specify values for two key assumptions on this screen: | + | Fundamental to the success of companies is their cash strategies. You need to specify values for two key assumptions on this screen: |
| - What are A/P at the beginning of the current (i.e., at the beginning of the modeling period) fiscal year? This is used just to get the first month's A/P on the balance sheet correct. If you are starting <php>echo $conf['comp_name'];</php> at the very beginning of your company's existence, this will be zero. | - What are A/P at the beginning of the current (i.e., at the beginning of the modeling period) fiscal year? This is used just to get the first month's A/P on the balance sheet correct. If you are starting <php>echo $conf['comp_name'];</php> at the very beginning of your company's existence, this will be zero. | ||
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| ====Additional Questions:==== | ====Additional Questions:==== | ||
| - | **[[:faqs:AP-negative|Can my average days outstanding for payments to vendors/suppliers ever be negative?]]** | + | **[[:faqs:supplier-payments:AP-negative|Can my average days outstanding for payments to vendors/suppliers ever be negative?]]** |
| - | **[[:faqs:techniques-lengthen-AP|What techniques exist to lengthen average days outstanding for payments to vendors/suppliers?]]** | + | **[[:faqs:balance-sheet:techniques-lengthen-AP|What techniques exist to lengthen average days outstanding for payments to vendors/suppliers?]]** |
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